May 30, 2011 / 4:03 PM / in 7 years

EU probes two U.S.-Asian computer hardware deals

BRUSSELS (Reuters) - EU regulators opened in-depth probes on Monday into two takeover bids in the computer hardware sector involving two Asian companies and two U.S. peers, saying it was concerned the deals would reduce the number of rivals.

<p>A Samsung Electronics hard-disk-drive (HDD) is seen at an electric appliance store in Seoul, in this picture illustration taken April 18, 2011. REUTERS/Truth Leem</p>

U.S.-based Seagate Technology has said it wants to buy Samsung Electronics Co’s loss-making hard disk drive unit for $1.4 billion -- a deal that will give Seagate access to Samsung’s NAND-type flash chips for its solid-state drive products.

Western Digital plans to purchase Hitachi Ltd’s hard disk drive business for $4.3 billion to give it an edge in developing next-generation storage technology.

The European Commission, the EU competition watchdog, which is now reviewing the two deals, said it wanted to take a closer look.

“Hard drives are the backbone of the digital economy. The sector has already experienced significant consolidation, and the proposed acquisitions will further reduce competition,” Competition Commissioner Joaquin Almunia said in a statement.

The EU executive said the Seagate and Samsung deal would consolidate the U.S. company’s position in the hard disk drive market, leaving only two rivals, Western Digital and Hitachi.

The Western Digital and Hitachi transaction would result in only one company competing in desktop hard disk drives and just two rivals in mobile hard disk drives, the Commission said.

The respective deals would increase Seagate’s market share to 40 percent, while Western Digital and Hitachi combined will have around half the market, according to analysts.

Western Digital said it was proceeding, on plan, with its integration-planning activities related to the proposed deal, and now expects the transaction to close in the fourth quarter of 2011.

The Commission will decide by October 10 whether to clear or block the two deals. The previous deadline for a decision on the Seagate and Samsung deal was Monday, while that for Western Digital and Hitachi was Tuesday.

Western Digital and Seagate have been struggling to adapt to a future where fewer consumers tote laptops. Flash drives, or solid-state drives, consume less power and are faster and are viewed by many as the future of the disk drive industry.

Reporting by Foo Yun Chee in Brussels and Brenton Cordeiro in Bangalore; Editing by Will Waterman, Sriraj Kalluvila

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